Agro Trade: India's policies have boosted Pakistan's earnings at the cost of Indian exports.

India has unwittingly pursued policies and actions that have helped and promoted Pakistan's foreign trade in agro commodities. Since 2006, trading trends in non-basmati rice, wheat, sugar, soymeal and onions lend confirmation to this fact.

The government virtually granted special status to Pakistan when it first restricted and then prohibited export of Indian non-basmati rice in 2007.

Pakistan was then free to exploit and substitute 3-4 million tonnes - of the seven million tonnes of its milled rice output - of west Asian and African markets fostered by India for four years. Today, it is well established as a competing country. Non-basmati rice is not the staple food of Pakistan; only 45% is consumed locally, and the rest is exported. Basmati rice is their preferred cuisine.

Likewise, our neighbour also developed new capacities for parboiled rice to cater to special requirements of Bangladesh and South Africa. After India's aggressive re-entry in September 2011, Pakistan's export of parboiled rice is down to a trickle; parboiled rice capacities are shut, but capabilities to reinvent them at a short notice do exist.

Now an established competitor, Pakistan is desperately seeking to match Indian prices of white rice, suggesting that their trading operations may either become more efficient or less profitable. Indeed, a unique parallel where the absence of competition provides market access and business rivalry contributes to greater adaptability.

In 2008, India crossbred a new hybrid basmati variety of Pusa 1121 with 8.2-mm grain length (against 6.2 mm of parmal range) that became an elite acquisition of Iranian market consuming 0.8-1 million tonnes per annum at almost $1,000 per tonne fob - which is double the valueof non-basmati rice. No patent exists for 1121. Pakistan has cloned its strain. Surely, Pakistan will improve upon this hybridisation and effectively compete incoming years.

Likewise, five years of prohibition on Indian wheat export enabled Pakistan to ship around two million tonnes wheat in two years (2010-11 and 2011-12). After lifting of India's embargo in September 2011, their business has declined significantly. USDA estimates Pakistan wheat export reduced to merely 0.3 million tonnes in 2012-13. A continued prevarication on subsidised export of Indian wheat may be advantageous to the competing origins in general.

On a request from Bangladesh in 2010, the government notified export of 0.5 million tonnes of FCI's wheat and rice to Bangladesh on a government-to-government basis. India and Bangladesh failed to arrive at mutually-acceptable commercial conditions. Indian exports were abandoned. Pakistan substantially filled the gap by private exports and made good Indian failure.

India's wheat gift of 0.25 million tonnes to Afghanistan in 2011-12, most of which was recently loaded from Kandla to Karachi port and then dispatched to Kabul via road, enabled Pakistan handling and transportation earnings. Due to grossly insufficient milling facilities in Afghanistan, Pakistani flour millers would have also been remunerated for tolling wheat flour by government of Afghanistan.

In 2012, the government negotiated the rupee payment arrangement for trade with Iran, in which, apart from other commodities, wheat figures as the prime commodity to be bartered against Iranian crude. Pakistan is also negotiating supplies of its wheat to Iran in return for Iranian urea. Wheat deals are currently held in abeyance due to quarantine concerns between Iran and India. India is proactively seeking its resolution with Iran. Pakistan may benefit automatically as phytosanitary apprehensions are common in the subcontinent.

On May 2-3, 2012, the government cleared quota-free sugar for export on open general licence without quantitative restrictions in pursuance to pleadings of the Indian Sugar Mills Association for better realisations abroad.

It may not be a coincidence that Pakistan Sugar Mills Association met President Asif Zardari the very next day (May 4, 2012) and sugar export quota from Pakistani mills was enhanced from one lakh tonnes to two lakh tonnes. A clear case of policy imitation!

Erroneous estimation of Indian annual sugar output in 2010 led to upward revision of production estimates from 14 million tonnes to 19 million tonnes. Local prices tanked. The government permitted re-export of 1.3 lakh tones of imported sugar lying at ports due to high-priced open general licence imports.

In the same year, Trading Corporation of Pakistan (TCP) was also importing sugar to mitigate shortages in Pakistan. Singapore traders arranged to ship one lakh tonnes of Indian sugar out of re-export allocation from Kandla to Karachi in a matter of days while TCP was facing default with Dubai traders.

Demand of high-protein feed rations is increasing in Pakistan. India is meeting full demand of 0.4 million tonnes of soymeal to mixers of cotton and rapeseed meals to augment the nutrition content of livestock in that country. Imports of soymeal from Argentina and US would be prohibitively costly.

At the end of December 2010, India faced supply constraints of onion. The only country that could immediately fill the supply-demand gap was Pakistan. Indian PSUs imported onion via sea route at prices around $700 per tonne cif. It was an opportunity and advantage for Pakistan for non-conventional items, even though for a small value. Had Pakistan permitted import of onion via land route, values would have been much larger.

Despite apparent political confrontations between the two countries, this invisible trade competition and cooperation goes on unseen and unnoticed.

Source : economictimes.indiatimes.com